The Federal Reserve minutes from September revealed officials were divided on whether further interest rate hikes would be needed before year-end. Long-term Treasury yields have risen significantly since the September meeting, which could reduce the need for more rate hikes if sustained. The minutes showed officials thought the risks of raising rates too much or too little were more balanced now. Some officials said communications should shift from how much to raise rates to how long to hold them at restrictive levels. All agreed rates need to stay restrictive for some time until inflation reaches the 2% target. Several officials are closely watching the real fed funds rate, which could rise as inflation falls if nominal rates are held steady.

EQUITY

Stocks were led higher by healthcare stocks such as Amgen, which closed up over 4% after an analyst upgrade, while energy and dialysis stocks lagged following M&A news and a positive Olympic clinical trial by Novo Nordisk. The markets are now pricing in just an 8% chance of a rate hike at the next Fed meeting in November, a sharp decline from previous expectations.

GOLD

Gold prices rose to two-week highs on the lower US dollar as Treasury yields fell, spurred by hints that the Federal Reserve's is taking a cautious stance on interest rates ahead of a key inflation report. If inflation data continues to moderate and Wall Street becomes wary of economic growth, gold could rally further on expectations of a pivot in early 2024.

OIL

Oil prices fell this week due to larger-than-expected builds in US crude and gasoline inventories, as reported by API. Expectations of easing supply concerns in the Middle East also put downward pressure on prices, as Saudi Arabia pledged to help stabilise markets. However, the EIA forecasts that lower global oil inventories in 2023 could provide some price support going forward.

CURRENCY

The dollar index steadied ahead of U.S. inflation, leading investors to believe the Fed is nearing the end of its interest rate hiking cycle as falling Treasury yields saw its 10-year fall to 4.5%. The euro rose to its highest level against the dollar in several weeks on this weakness. The Japanese yen continues to weaken as it hovers around 149 levels, although the dollar fell for several sessions.